Entrepreneurs in low-income areas find ways to grow businesses
In underserved communities, entrepreneurs have a hard time finding capital to start and grow their businesses.
But several programs in Chicago are helping these micro-business owners secure loans and be financially successful.
One of those programs is Sunshine Gospel Ministries in the Woodlawn neighborhood. Participants regularly go through hypothetical scenarios to learn how to complete contracts and balance their books. The business academy’s mission is to help train and support entrepreneurs in low-income communities
Over the past two years, 70 micro business owners have gone through the program.
These are one-person home operations -- people who cut hair, make T-shirts or do event planning.
Jittaun Priest, who owns a decorative painting business, completed the program earlier this year.
“My books are more balanced and I believe that it’s given me more confidence to go out and talk to people more because I have a better focus of what I’m doing,” Priest said of participating in Sunshine’s programs. “I’m not all over the place like I was. The focus (is) helping me realize what my niche is, and go out there and make that step.”
Joel Hamernick is executive director of Sunshine Ministries and said the business academy started as a way to deal with the absence of work in communities - and lack of capital.
“If you grow up in a cash economy where nobody has a bank account, everybody goes to the payday lender and the cash advance places to pay their bills, then you really don’t have the basic functional tools that allow you to save a tremendous amount of money over time and put you on a pathway where you can navigate to know when you’re being taken advantage of and when you’re not,” Hamernick said.
Earlier this year, the non-profit research group the Woodstock Institute put out a study on race and income disparities when it comes to access to business credit. Among the findings: Businesses in majority white tracts were more likely to receive loans than businesses in majority minority tracts of the same income level.
In some cases, Sunshine graduates end up getting micro loans.
Accion Chicago is probably the best known local microlender. Most of its clients are people of color with moderate to low income. The average loan is $8,400.
“Most financial institutions would prefer not to give somebody a loan under $25,000, (instead) maybe a credit card because it takes a lot of labor to produce a loan,” said Steve Hall, Accion Vice president of business development.
Hall said most people associate microlending with developing countries. But in the United States, the average small business is more than $400,000.
“Having a microloan is basically any loan than can help you bridge a gap, whether its short-term working need to cover payroll (or to) pay off an additional vendor to get additional inventory,” Hall said.
Recently, Accion started SEED Chicago. It helps entrepreneurs find money via online crowd sourcing.
It’s just another way to give people access to much needed capital….when there is none readily available.